Russian President Vladimir Putin said on Friday that he welcomed plans put forward by Ukrainian president-elect Petro Poroshenko, with whom he had a brief initial meeting earlier, to stop the violence in Ukraine.
However, he also said Ukraine must stop what he called a "punitive" military operation in its southeast region and warned Russia would retaliate with measures to protect its economy if Kiev signed an association pact with the European Union.
The two leaders met on Friday for the first time since Moscow annexed Crimea as world leaders commemorated the 70th anniversary of the World War Two D-Day landings in France.
French President Francois Hollande and German Chancellor Angela Merkel brought them together for a 15-minute meeting before an official lunch for visiting world dignitaries.
Hollande's office said the two men shook hands and agreed that detailed talks on a ceasefire between Kiev government forces and pro-Russian separatists in eastern Ukraine would begin within a few days.
They also discussed political steps to de-escalate the crisis including Russian recognition of Poroshenko's election as well as economic relations.
"It was a normal, serious exchange between two leaders," an official in Hollande's office said, adding that the meeting had been prepared by several days of contacts but kept secret until it happened.
"This marks tentative progress which he (Hollande) welcomes, particularly given this occasion so symbolic for peace."
The president invited Poroshenko to Normandy as his personal guest at the last minute in an effort to break the ice between Moscow and Kiev even as fighting continues in eastern Ukraine between government forces and pro-Russian separatists.
World leaders and veterans earlier paid tribute to soldiers who fell in the liberation of Europe from Nazi German rule, at a series of ceremonies around the Normandy beaches where allied forces landed on June 6, 1944.
Wreaths, parades and parachute-drops honored history's largest amphibious assault, in which 160,000 U.S., British and Canadian troops waded ashore to confront German forces, hastening its defeat and the advent of peace in Europe.
Flanked by stooped war veterans, some in wheelchairs, U.S. President Barack Obama joined Hollande to commemorate victory and reaffirm U.S-French solidarity before the 9,387 white marble headstones of fallen U.S. soldiers at the Normandy American Cemetery.
"Democracy's Beachhead "
Obama said the 50-mile (80 km) stretch of Normandy coastline - where allied soldiers landed under fire on beaches codenamed Omaha, Utah, Gold, Sword and Juno - was a "tiny sliver of sand upon which hung more than the fate of a war, but rather the course of human history."
"Omaha - Normandy - this was democracy's beachhead," said Obama. "And our victory in that war decided not just a century, but shaped the security and well-being of all posterity."
The president sought to link the sacrifices of World War Two to U.S. servicemen killed in combat since the Sept. 11, 2001 attacks on the United States by al Qaeda Islamist militants.
The "9/11 generation of service members" understood that "people cannot live in freedom unless free people are prepared to die for it", he said.
Hollande declared that France "would never forget the solidarity between our two nations, solidarity based on a shared ideal, an aspiration, a passion for freedom".
Twenty-one foreign leaders attended the commemorations, including Britain's Queen Elizabeth and Prime Minister David Cameron, Canada's Stephen Harper as well as Merkel and Putin, whose country suffered the heaviest casualties and struck decisive blows on the eastern front to defeat the Nazis.
But while the unity of allies and their bloody sacrifices were the central theme of D-Day remembrance, private talks among government leaders focused on the most serious security crisis in Europe for more than two decades: Ukraine.
Russia's annexation of Crimea in March and the standoff in eastern Ukraine have plunged Moscow's relations with the United States and European Union to a post-Cold War low.
Fighting continued in eastern Ukraine as Ukrainian forces fended off an attack by pro-Russian separatists on a border post there late on Thursday. The attack was repelled by air strikes but the insurgency has escalated in the past two weeks, killing scores and prompting some families to flee.
Earlier, Merkel and Putin held an hour-long meeting in Normandy on Friday and a German government spokesman said the chancellor had told the Russian leader Moscow had "great responsibility" to help bring peace to Ukraine.
Russia announced on Thursday it was sending its ambassador to Poroshenko's inauguration on Saturday.
A Group of Seven (G7) summit of industrialized nations in Brussels on Thursday, from which Putin was excluded, urged Russia to work with Kiev's new authorities to restore stability in eastern Ukraine or face possible tougher sanctions.
On Thursday, Obama told reporters the West would "have no choice to respond" with new sanctions if Russia failed to recognize Ukraine's new government and work to calm pro-Russian gunmen in its former Soviet neighbor.
"There is a path in which Russia has the capacity to engage directly with President Poroshenko now. He should take it."
Behind the facade of G7 unity, differences emerged over a 1.2 billion euro ($1.63 billion) French contract to sell two Mistral helicopter carriers to Russia. Obama said Paris should have pressed "the pause button" on the deal.
Foreign Minister Fabius said the contracts, mostly paid up, stood "for many jobs."
"The French tradition, which is the same as the United States', is to honor its contracts."
But Defence Minister Jean-Yves Le Drian told France Inter radio a decision would be made given the international situation later this year when the first ship is due to be delivered.
Washington says the deal sends the wrong message to Russia at a time of sanctions imposed by Western states on Moscow over the conflict in Ukraine.
—By Reuters with CNBC
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